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Comment Letter On Our Crime Scene Of A Stock Market

Tyler Durden's picture


Still wondering why the US (and global) stock market is nothing more than a crime scene, and an imminent catastrophe waiting to happen, supervised and regulated by a bunch of "special" porn addicts? Then read the following comment letter and wonder no more.

Subject: File No. S7-02-10
From: R T Leuchtkafer

Must read:

File No. 265–26 and Release 34-61358 File No. S7-02-10

On a cloudy autumn afternoon in 1870, the Chicago White Stockings, a
team that would evolve into the present day hapless Chicago Cubs, played
an exhibition baseball game against a hastily assembled gang of
amateurs calling itself the Board of Trade Scalpers. It was a rout. In
nine innings of play at Dexter Park, next door to Chicago's new
stockyards, the White Stockings crushed the Scalpers by a score of 30 to
2, likely the only time scalpers on the Chicago futures exchanges were
so convincingly restrained.

140 years later, almost to the day, U.S. Commodity Futures Trading
Commission Chief Economist Andrei Kirilenko and several co-authors
published a paper called "The Flash Crash: The Impact of High Frequency
Trading on an Electronic Market," to date the definitive examination of
high frequency market makers. What Kirilenko reported is deeply
troubling for U.S. markets, implying structural instability, crashes and
liquidity crises large and small, toxic quotes and price discovery in
the public markets, and the uncertainty of any order's likely effect on
prices. His breakthrough paper is a decisive empirical justification for
reforming how high frequency market makers operate in today's markets.


Though he doesn't use the word, Kirilenko's study is the latest U.S.
government agency report on scalpers. Perhaps the earliest was by the
Federal Trade Commission (FTC) in a seven volume report on grain
trading, published over six years beginning in 1920. Defining a
"scalper" as a firm that "typically buys and sells in large quantities,
expecting to hold the trade open only a very short time" and that
"intends to be even as to quantities bought and sold at the close of the
business day and is reluctant to carry a trade over night," the U.S.
government's 1920 definition of scalping tracks what today's high
frequency market maker firms say about themselves almost word for word.

While market makers in the futures markets have long fit the
government's definition of a scalper, in U.S. equities in the recent
past old-fashioned market makers carried inventory and committed capital
overnight -- even several nights -- to smooth buying and selling
pressures. They were required to post competitive quotes and to trade
sparingly in the exchange markets. No more. They don't exist. They were
too expensive and corruptible, and a series of well-intentioned reforms
squeezed or priced them out, unwittingly opening the door to scalpers
from the futures markets.

More than a few high frequency equities market maker firms today were
founded by "locals" (scalpers) from the futures markets, particularly
the Chicago futures markets. "Scalper" is not an endearment, so these
firms gussy up by calling themselves "liquidity providers" or "market
makers" or "principal traders" instead. The FTC observed the same in
1920, saying "There is a preference for designations that sound well.
Nobody calls himself a pit scalper." Though "liquidity provider" and
"market maker" are stripped of their former meaning in the equities
markets, high frequency firms wear these designations as if they were a
rented tux.

In his autopsy of e-mini SP 500 futures trading around the May 6,
2010 Flash Crash, Kirilenko describes how these firms destabilize
markets. There's a tipping point in volatile markets when, in an
instant, high frequency market makers stampede to rebalance their
inventories, even cascading positions from firm to firm, while prices
collapse. Kirilenko calls this "hot potato" trading, but it's an
interdealer panic, a market maker fratricide. His conclusions extend to
any volatile episode, because, as he wrote, high frequency market makers
"did not change their trading behavior during the Flash Crash."

Just as there were few restraints on the fund group whose selling
Kirilenko shows tipped the Flash Crash, there were few restraints on the
high frequency market maker algorithms that bought from it. Markets
crashed when high frequency market makers hit internal inventory limits
and unloaded onto the next market maker, which then hit limits and
unloaded onto the next one, and so on, driving the market down by almost
$1 trillion dollars in a few minutes.

Kirilenko studied e-mini trading in the futures market, but the CFTC
and U.S. Securities and Exchange Commission staff report on the Flash
Crash showed the same behavior at work in the equities markets,
doubtless from many of the same firms.

"Market Structure as a Joke"

The scalper's destabilizing practices are that it can quote as it
pleases and trade as aggressively as it pleases and still carry the
regulatory imprimatur and privileges of a market maker. As recently as
the late 1990s, little of this was true in the equities markets. As the
cash equities market automated, moved to decimals, deregulated and
fragmented in the last 10 years, scalpers moved in with a
soon-to-dominate business model, one they learned in the futures pits --
aggressive and often frenetic trading, keeping little or no inventory.

Instead of smoothing buy and sell pressures, as market makers in the
equities markets were -- in theory -- once supposed to do, scalpers
exacerbate or hide from volatility, as Kirilenko discovered in the Flash
Crash. The same was true in 1920, when the FTC noted that in volatile
markets scalpers "run with it, and they may accentuate an upward or
downward movement that is already considerable," or even, fearing
losses, that a scalper "closes out his trades when the market goes
against him, and this practice can but tend to accentuate the swing."

Registering as equities market makers, given valuable and unique
regulatory preferences and access, cozying up with exchanges desperate
for business, and then let loose on the stock markets, the scalper's
business model makes the stock markets structurally unstable. Scalpers
make the futures markets unstable too -- the FTC observed that scalpers
"themselves often create the volatility with which they are most
concerned" -- but their effect is especially pronounced in the equities
markets. Unlike the futures markets, prices in the stock market aren't
disciplined by prices in the spot market -- it is the spot market. And
unlike the futures pit markets, the public equities markets for the most
part trade in fixed price/time order, with no choice over
counterparties and no way to avoid scalpers who might turn to compete
for the very liquidity they just extended.

The stock and futures markets differ in other ways too, if only
because of the public confidence required of them. Whether the public
invests in stocks has much to do with its confidence in the stability
and integrity of the stock market. Whether the public buys orange juice
has little to do with its confidence in the stability and integrity of
the orange juice futures market. As important as the futures markets
are, they aren't forums for long-term, even generational capital
commitments, and the public doesn't directly invest its nest-eggs or
retirement savings in them. Companies don't rely on them to raise
capital for new plants, equipment and jobs.

After just the last few years of their relative dominance, these
firms have had extraordinary effects on the public equities markets.
Institutional volume is fleeing, while retail volume is skimmed off and
shrinks. Apart from liquid stocks, spreads have increased. Ominously,
exchanges are being co-opted, their traditional purpose recast as
technology providers, as simple hosts to a migrant group of high
frequency firms, and exchange markets, liquidity formation and price
discovery are fragmenting and uncoupling.

He might have had something else in mind, but we can take it as an
elegy to all of this when one senior stock exchange official was quoted
in the Financial Times as saying, "Most of the world views our market
structure as a joke."

Inventory Microcycles

A recent study found that high frequency firms post the best price at
least 50% of the time in the equities markets. The study's author and
high frequency firms pounced on this as strong evidence high frequency
firms contribute to price discovery, more so than any other kind of

The analysis and conclusion are superficial. A bid or offer has at
least four dimensions. Beyond price and size, any resting bid or offer
has a lifetime, and the inventory cycle or position resulting from any
executed bid or offer has a lifetime. Even if it's at the best price, a
bid or offer lasting a fraction of a second hasn't contributed to price
discovery, and market makers use the latest technology to post and
cancel thousands of bids and offers per second, even in the same stock.
An executed bid or offer where the position is unwound quickly and
aggressively isn't price discovery either. Kirilenko found high
frequency market maker inventory or position half-lives of less than two
minutes in the futures market. Some equities high frequency market
makers claim as little as 11 seconds in their stocks. Market maker
inventory cycles of a few seconds or minutes, enforced by aggressive
trading as time or prices go against the firm, actively destabilize
prices, especially so in already volatile markets.

Of a quote's four dimensions, only one has materially improved in the
last 10 years. Because of decimalization, automation and deregulation,
quoted spreads have improved for liquid stocks in stable markets. But
quote duration is down, time-in-inventory is down, and for many stocks
quote size is flat or down. This is all because, to manage costs, high
frequency market maker inventory cycles are engineered down to seconds,
and these firms keep their capital commitments low. High frequency firms
will tell you they're like any other business except that capital is
their inventory, and like any other business they make money by turning
over their inventory, so they churn it as fast as they can. Frenetic
trading isn't a byproduct of their strategies -- it is the strategy.

The effect of all of this is that investors looking at a quote today
can't predict what the quote means. They can't tell whether the quote
will be there when they submit an order against it, and they can't tell
when their own buying or selling will trigger a market maker's risk
threshold. If they do trigger a threshold, the market maker cartwheels
from liquidity supplier to liquidity demander to compete with an
investor's own liquidity needs. As it cartwheels, it can shock prices.
And when events align so market makers turn as a flock, as they did in
the Flash Crash, they can collapse the market.

This isn't price discovery. It's just short-term inventory management for unsupervised and risk averse scalpers.

Toxic Quotes

Scalping dominates today because it's cheap, and because it's cheap
scalpers can post tighter spreads. It's cheap because the scalper's
liquidity is toxic. Its quotes are priced aggressively, showing tight
spreads, but only for small quantities with very short lifetimes, with
aggressive inventory management behind them to limit the firm's
exposure. Firms fine-tune their risk models to make their inventory
cycles as short as possible while preserving profits, lowering risk and
costs. And since current national market regulations focus mainly on
only one of a quote's four dimensions -- price -- if you're the best
price, by rule everyone must do business with you, and you gain market

Exchange-regulated firms with longer term inventory models couldn't
compete against the scalper's lower costs and tighter spreads, so over
the last 10 years exchanges deregulated and became hosts for the
scalpers, even cloning themselves to make new hosts. Deregulated, toxic
quotes flourished and crowded out more stable quotes. U.S. exchanges
today are interchangeable because scalpers determine market structure
through their increasingly toxic quotes. Rather than a diverse ecosystem
of market centers, with systemic resilience in that diversity, our
deregulated markets are inbreds relying on the same high frequency
market maker firms trading the same toxic scalper models.

As has been said, an insight from the Flash Crash is that "volume is
not liquidity." A further insight is that, batted about by scalper
inventory microcycles, published quotes don't represent genuine
liquidity either. A best bid today isn't a bid to own shares at a price,
or even a traditional dealer or market maker's attempt to provide
liquidity. As much as 50% of the time it's just a firm trying to scalp a
few basis points as quickly as possible. When that scalper's bid is
executed, it then becomes an unexploded competitive liquidity demand,
with the timer set, as Kirilenko found, at about two minutes, or even
less. These destabilizing trade practices are a fundamental structural
instability behind the Flash Crash.


At the November 5, 2010 meeting of the Joint CFTC-SEC Joint Advisory
Committee on Emerging Regulatory Issues, former SEC Chairman David Ruder
wondered whether to increase costs for high frequency market makers. He
didn't suggest taxing them, as with a transaction tax. He asked whether
they should face affirmative quoting obligations, "whether there should
be some requirements that they provide liquidity." But along with
affirmative quoting obligations, they should also face negative
obligations, once common regulations limiting their ability to
exacerbate price movements. Without negative obligations, affirmative
quoting obligations make quotes still more toxic -- firms required to
provide liquidity will trade even more aggressively to manage inventory.

Negative obligations will prevent scalper fratricides, and stop high
frequency market maker firms from unloading inventory onto the firms
behind them. Without that kind of "hot potato" trading, the volume
sensitive algorithm that tipped into the Flash Crash would not have
descended into a lethal feedback loop as it traded against cart wheeling
toxic quotes. The simplest negative obligations will extend market
maker inventory cycles, preventing these firms from flipping into a
liquidity crisis, as they did in the Flash Crash.

In the equities markets, inventory microcycles are another reason to
restore the public's priority at a price. The public's orders used to
trade first at a price because professionals had time, place and
information advantages over the public, but that regulation was
eliminated as the exchanges deregulated. Professionals still have these
advantages over the public, and today they are for sale to as many
professionals as can afford them. Apart from questions of access and
fairness, a frequently overlooked structural advantage of public
priority is that the public's inventory cycle is longer than that of
market makers. Restoring the public's priority in price queues both
limits the reach of unexploded liquidity demands and recognizes the
public's many disadvantages to professional scalpers.

The equity market reforms and deregulation of the last 10 to 15 years
happened for good reasons -- monopoly profits were flowing to
intermediaries and exchanges, intermediaries were taking advantage of
their customers, innovation was being strangled by entrenched interests
-- and it was time for reform. As many of us hoped, new participants,
technology and business models sprang up. Nobody wants to undo that
progress. By analyzing trade and position data from the futures market,
Kirilenko's breakthrough was to show how a dominant class of these
business models can be disruptive, and how these models can be
destabilizing enough to create systemic risk as an inherent consequence
of their design. On a gross basis, these models can be checked by
circuit breakers or price limits, and this is one reason price limits
are standard in the futures markets. In the equities markets, these
models must be checked even before they trigger circuit breakers or
price limits because the equities markets are profoundly different from
the futures markets. The simplest way to check these models is to put
reasonable restraints and obligations on them.

A basic function of any market is to produce a quote. The scalper's
toxic quotes, thousands of them a second, are a hoax on our equities
markets. No one planned it. It happened as an unanticipated consequence
of well-meaning reforms to a flawed system. There is no competitive
solution to this problem within current regulations so long as quote
price is a routing table's first regulatory imperative. Competition
simply forces exchanges to publish more and faster toxic quotes, as
market power continues to shift from the exchanges to the scalpers.

Finally, some have pointed out that regulation didn't work in the
market break of 1987, when old-fashioned specialists and market makers
shirked their responsibilities and hid from the market, and regulation
won't work today. Regulation didn't stop them from shirking their
responsibilities, but regulation didn't excuse them either, and
regulation didn't encourage them to automate a deadlier game than
hide-and-seek -- intermediaries didn't exacerbate the 1987 market break
by playing market maker "hot potato," a feat unique to the Flash Crash.
And the logic of "regulation didn't prevent 1987, so regulation won't
work" is a civic novelty. Should we apply that logic to drunk driving,
or to any other misbehavior?

Of course not. Please regulate them.


R. T. Leuchtkafer


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Thu, 02/17/2011 - 15:04 | 971040 Cognitive Dissonance
Cognitive Dissonance's picture

There's a tipping point in volatile markets when, in an instant, high frequency market makers stampede to rebalance their inventories, even cascading positions from firm to firm, while prices collapse.

The herd moving at a clock/cycle speed of 2 Ghz. Oh the insanity. Thank God it isn't at Planck speed or we'd be really screwed.

Thu, 02/17/2011 - 15:52 | 971250 patience...
patience...'s picture

I would rather think of the Planck length as

Where a lot of banksters should end.

Thu, 02/17/2011 - 18:06 | 971920 Common_Cents22
Common_Cents22's picture

Aren't speed limits the answer here? 

Thu, 02/17/2011 - 15:01 | 971041 alien-IQ
alien-IQ's picture's a story begging for some ZH love:

meanwhile in Wisconsin...13,000 people storm the Capitol and the mainstream media promptly ignores the story...which is, luckily for us, covered by...Russia Today...(the irony here is beyond thick)

Thu, 02/17/2011 - 15:12 | 971087 Jason T
Jason T's picture

are they willing to die for what they believe in?  I doubt it.

Thu, 02/17/2011 - 15:47 | 971156 Cognitive Dissonance
Cognitive Dissonance's picture

Give them time. We the people are just beginning to discover our inner courage and hidden rebel.

While courage can't be made, it can be found where it has been lying dormant and unused. Once found it grows quickly; some would say exponentially.

Thu, 02/17/2011 - 15:59 | 971276 alien-IQ
alien-IQ's picture

CD...the one thing I've become certain about is that when you start to see mass protests in America...the first people that will turn against the protesters will be fellow Americans because, let's face it, a large part of the population of this country are nothing but ignorant sycophants who are quick to support the type of socialism implicit in the vast subsidies to the military-industrial-complex, but not that type of socialism which maintains public projects for the disemployed and the unemployed alike.

The government will need not call out the National Guard on it's's people will police dissent themselves since it is dissent they fear and serfdom they embrace.

In short...this country is fucked...and quite deservedly so.

Thu, 02/17/2011 - 16:25 | 971373 Cognitive Dissonance
Cognitive Dissonance's picture

While I agree that initially the average Joe will continue his and her compliant ways and become junior sheep herders, those who begin to show courage will show more as needed. And courage becomes infectious when repeatedly displayed.....unless tanks are in the streets. That would quiet down the American protests. At least at first.

But then some (not all, not even a majority) of the compliant Joe's will look around and see the petty tyranny for what it is and begin to ask questions among themselves, even if only within their own minds. It won't take a majority to overcome this insanity, only a vocal minority. The mind of the mob is a wonder to behold. It can turn on it's controllers very quickly. This is why mobs are so frightening to TPTB.

It's going to get messy, very very messy. But TPTB will eventually have two choices. Relent or clamp down so hard that nobody will be able to remain in denial. Then there goes your productivity and the financial collapse is assured.

Thu, 02/17/2011 - 16:52 | 971536 Alienated Serf
Alienated Serf's picture

La Resistance

Thu, 02/17/2011 - 18:10 | 971935 tsx500
tsx500's picture

Sat. nite ....  rent   ' V for Vendetta ' .  eat popcorn.  watch V for Vendetta .  repeat .

Thu, 02/17/2011 - 19:04 | 972140 Amish Hacker
Amish Hacker's picture

This is only the beginning, the phase when we argue over the distribution of remaining abundance. What happens when we face real hardship?

Thu, 02/17/2011 - 17:48 | 971826 GoinFawr
GoinFawr's picture

Alien IQ: Spot on. Sad, unfortunate, but spot on.

CogD: I hope you're right, but I'm not holding my breath.

Thu, 02/17/2011 - 15:37 | 971200 thedrickster
thedrickster's picture

They are government employees revolting against an attack on their sacred unions and CBAs.

It's about damn time that CBA be taken away. Why in the world would any sane group of people allow government employees to unionize against the taxpayers, all the while using the "democratic process" in order to effectively vote themselves higher wages and unsustainable retirements.

Fuck the parasites, let them experience employment at will and a market wage.

Thu, 02/17/2011 - 15:45 | 971227 alien-IQ
alien-IQ's picture

so a teachers union demanding benefits they were already promised are parasites that should work for market wages? and what's your fucking idea of a fair market wage for the person burdened with the task of educating your child? $2 per day?

yet the fucking banks get trillions in bailouts for bad bets they made and scams they ran that blew up in their face...and their market wage is in the multi-millions per year...but I suppose you're just a-fuckin-ok with that huh?


Thu, 02/17/2011 - 16:19 | 971292 thedrickster
thedrickster's picture

"so a teachers union demanding benefits they were already promised are parasites that should work for market wages?"

Benefits they extorted from the tax payers actually, collectively bargaining against Joe Property Tax payer who doesn't actually get any say in the matter but for his "vote".

"what's your fucking idea of a fair market wage for the person burdened with the task of educating your child? $2 per day?" Whatever the market will bare, competition is desperately needed to produce workable alternatives to the current set of government sponsored indoctrination camps.

"yet the fucking banks get trillions in bailouts for bad bets they made and scams they ran that blew up in their face...and their market wage is in the multi-millions per year...but I suppose you're just a-fuckin-ok with that huh?"

No of course not. That said the two are not mutually exclusive. Should the teachers take deep cuts simply to assure a continued revenue stream to the state's bondholders, no. The reality is however on display to WI's south, IL is a case study in parasitic public unions extracting unsustainable wages & retirements from the tax payers who are powerless to stop them. This WI move is a proactive one to stave off Illinois style debt slavery.

And I doubt very much that any TBTF got a penny from the State of Wisconsin.

Fri, 02/18/2011 - 20:12 | 976122 oldowan
oldowan's picture

"fucking" "fucking" "fucking" "fucking"...


You're screaming so loud that I cannot hear you.  



Thu, 02/17/2011 - 16:09 | 971302 Impetuous
Impetuous's picture

The bankers got theirs so I want mine mentality will not help. Teachers should get a market wage. What that is we don't know because it has been decades since the unions monopolized the whole mess. Market wage does not mean a small wage. Perhaps the best teachers are worth a million dollars per year and the worst ones should get fired. We don't know because the unions prevent both.

Thu, 02/17/2011 - 16:30 | 971422 alien-IQ
alien-IQ's picture

Do you even know anybody that teaches for a living? I'm not talking about some tool teaching economics at some Ivy League brainwashing academy to pawn off his latest book as required reading...I'm talking about real average school teachers. Public High School and Middle School? these people aren't exactly living in the lap of luxury. In fact, most of the teachers I know, which is plenty since there are two in my family and many many of their friends are as well, work second jobs to make ends meet if they are not married with a working spouse. And this is the re3sult of collective bargaining...a barely living wage for a very important job. Of those teachers that I do know, none drive nice new cars. Few own a home. Most rent apartments. Yet...somehow...they must, according to some here, compete for lower wages? Are you people fucking crazy or just clueless?

Thu, 02/17/2011 - 16:39 | 971464 thedrickster
thedrickster's picture

A close relative of mine makes six figures as an elementary school teacher in the broke ass state to WI's south.

This relative will receive 75% of salary with 3% annual increases for the rest of their life. Nice gig if I wasn't footing the bill.

Thu, 02/17/2011 - 18:18 | 971967 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

I wouldn't bank on your relative getting that pension the rest of their lives when the state files bankruptcy soon.

Thu, 02/17/2011 - 19:29 | 972206 alien-IQ
alien-IQ's picture

"makes six figures as an elementary school teacher"

that is quite simply an offensively blatant lie.

yes I am in fact calling you a liar.

Thu, 02/17/2011 - 21:20 | 972644 Milestones
Milestones's picture

My daughter is a 12 year teacher in another state with a Masters degree and is a master teacher and makes 30% less than your teacher example.

Further, she teaches high school to kids already committed to college--The cream of the cream of students.

My reaction__Illinois deserves to go broke if the people are that stupid. But most of all--I think you're full of it.    Milestones

Thu, 02/17/2011 - 23:14 | 972989 shano
shano's picture

That is bullshit.

Fri, 02/18/2011 - 01:25 | 973228 poor fella
poor fella's picture

Bull-fucking-shit...  >=P

Shut that skid-mark you call a mouth before more stink comes outta it.

Thu, 02/17/2011 - 16:52 | 971537 arkady
arkady's picture

Since you have teachers in your families, why don't you excuse yourself from this discussion because you are clearly biased.  Apparently you can't tell a difference between teachers and unions. Nobody here on this board criticizes teachers, this is a union problem.  Collective bargaining is extortion, pure and simple.  Making an employer negotiate and restricting the employer's option to walk away from a "deal" is hardly democratic, fair or righteous.  Either is mandatory unionism which is how the union bosses thrive, plenty of teachers wish to be absolved of these annoying institutions. 

Public unions are a farce, contradiction in terms and do nothing but make the union bosses richer while screwing the: teachers, kids, taxpayers and overall community. 

Thu, 02/17/2011 - 18:11 | 971943 arkady
arkady's picture

Yeah keep on junking, since you can't actually muster a logical argument this is your best bet. 

Thu, 02/17/2011 - 16:58 | 971554 Impetuous
Impetuous's picture

The average elementary teacher across this country earns $102,000 per year counting wages and benefits. For those wonderful teachers out there who can single-handedly create an army of educated citizens (which we desperately need) that is too little. For those teachers who are not contributing to the education of their students, they should be removed from the classroom immediately. The unions prevent the good teachers from earning more and the poor teachers from being fired. In this way we discourage the best and coddle the worst. This cannot be good for the people these protestors should be more worried about: the students.

Thu, 02/17/2011 - 22:34 | 972888 kornholio
kornholio's picture

i call absolute BULLSHIT on 102 grand for elem teachers ACROSS the country... that is in FACT a lie, so show me your source. I live in NC and they dont make half of that here...the fucking principles dont make STFU

Thu, 02/17/2011 - 17:21 | 971671 Common_Cents22
Common_Cents22's picture

Name one teacher who was forced into being a teacher.


My niece just chose to be a teacher, nobody forced her.


If you get your masters you can make a nice living.  When you annualize the pay, benefits, pensions's pretty dang good gig.   Starting pay does suck.  Again, nobody forces people into teaching and the comp is well known.


Comparisons between teachers and banksters is absurd.   I'll go ahead and compare myself with a hollyweird leading man and will you pay me the few million difference in earnings?

Fri, 02/18/2011 - 20:14 | 976127 oldowan
oldowan's picture

Doesn't matter.


We're out of money.



Thu, 02/17/2011 - 16:12 | 971331 Uncle Remus
Uncle Remus's picture

so a teachers union demanding benefits they were already promised are parasites that should work for market wages?

Yeah, that about sums it up.

yet the fucking banks get trillions in bailouts for bad bets they made and scams they ran that blew up in their face...and their market wage is in the multi-millions per year...but I suppose you're just a-fuckin-ok with that huh?

I am not so sure that's a parallel you want to draw.

Thu, 02/17/2011 - 16:14 | 971334 SRV - ES339
SRV - ES339's picture

Relax, the "Dickster" is just a Fox shill parroting the party line... Fox did a report on Wisconsin today, and the focus was 100% on the Dem Senators that have skipped the state so the GOP Gov's storm troopers can't find them and "force them to vote" (which is exactly what he's ordered)... of course to Fox they are communist traitors, instead of hero's standing up to tyranny.

To all the Tea Partiers out there... be very careful what you wish for... if you're not part of the top 10%, you are the enemy!

btw... the big issue here is not wages, they're more than willing to bargain... the GOP Governor (for all of a few weeks) will not talk, and gutting collective bargaining rights is the real goal of the Tea Party owned Gov.

Thu, 02/17/2011 - 16:18 | 971349 thedrickster
thedrickster's picture

A shill, LOL.

No government employee should have CBA "rights" for it is everyone but the public employee that loses in the zero sum game, without a seat at the negotiating table.

I am all for private sector CBA but the tax feeders can/should fend for themselves.

Fri, 02/18/2011 - 20:15 | 976130 oldowan
oldowan's picture


Thu, 02/17/2011 - 16:06 | 971298 Magic Mamaliga
Magic Mamaliga's picture

yup... i can already hear the chinese worker making our iphones now...

"fuck the parasites, let them experience child labour (reported at Foxconn ) and less than $2 a day wages while living in a shoebox with a dozen others in the same boat"

Misery loves company I guess.  It's easier to wish that these "parasites" be brought down to a lower level rather than fighting through the "democratic process" to get the same benefits.  I'm not saying it's easy to fight.  Maybe acknowledging that you might be angry at your perceived powerlessness is a start instead of effectively believing that "if i can't have it, nobody can..."

Thu, 02/17/2011 - 16:15 | 971343 thedrickster
thedrickster's picture

I have absolutely no problem whatsoever with private sector unions and collective bargaining.

This is government, the other side of teacher union CBA are other government employees. These administrators etc aren't incentivized to ensure that retirement packages are sustainable, they have the customary short time horizon of actors in a democracy seeking to extract the maximum possible gain (labor peace, no bad press) with no concern whatsoever for whether the pensions are sustainable 30 years out. The taxpayers who are actually the unions CBA counter party have no say, they just foot the bill by being squeezed year after year for additional tax revenue not to support not just the current crop of teacher's lifestyles but those long retired. 


Thu, 02/17/2011 - 16:38 | 971452 SRV - ES339
SRV - ES339's picture

Government unions are pro Dem... the Tea Party will stop at nothing to bust them, for their corporate masters, to kill the Dem election organizing skills (they're very good at it).

Why... more Tea Party corporate (the grass roots shit is just to reel in the sheeple) power through a GOP controlled government... then say goodbye to the middle class (created through decades of blood and sweat by the union members you hate, but I'm sure you are quite happy to benefit from their hard fought victories... 40hr week, a living wage for an honest days work, weekends off, and many more you simply take for granted)!

Glenn's on soon... you better go get your daily hate fix!

Thu, 02/17/2011 - 16:41 | 971477 thedrickster
thedrickster's picture

Oh suck it.

"Hate speech", "Beck" break out your paradigm cracka.

Those union election organizing skills have bankrupted the state to WIs south. This is unsustainable.

Thu, 02/17/2011 - 23:21 | 972998 shano
shano's picture

Funny, Wisconsin was one of the few solvent states until the Gov. gave corporations a 145 million dollars in tax cuts.  Children are more important than corporations.  How would corporations have any customers or workers if they did not have an educated populace.  We get what we pay for.  


In Vermont they pay for very good schools, in Arizona they pay very little for crappy schools.  Arizona is broke and killing people by cutting health care services, Vermont is doing quite well with a 6% unemployment rate-and all their kids have healthcare.  They will be the first state to enact a state wide single payer system.  And they did all this by NOT letting corporations raid the treasury or do whatever they pleased.

Thu, 02/17/2011 - 16:50 | 971522 wackyquacker
wackyquacker's picture

exactly. Private sector unions (when not bailed out-gm etal) are subject to market forces and have to compete. Public sector unions do not. No natural system of check and balance. This showdown is a long time coming.

To you WI teachers: get your whiney asses back in the classroom (for the children, of course)

Thu, 02/17/2011 - 18:08 | 971922 GoinFawr
GoinFawr's picture

Divide and conquer.

You stupid "I'm all right so ef all the rest"/"If I can't have it you don't deserve it either" Americans make it so easy.

 That's it, keep clawing over one another for the scraps brushed off the tables of your plutocratic masters; play right into their hands.

What a bunch of rubes.


The teacher who's predecessors fought for a 'half-decent' living aren't your enemy.

The guy who worked 40 years and got laid off and is now collecting a tithe of what he paid into UE bene's just trying to keep a roof over his family's head isn't your enemy.

The unfortunate buying processed corn syrup with his SNAP card to survive awhile longer isn't your enemy.

All those listed above cost you pennies compared to the daily jacking you're getting elsewhere (c'mon you know where- keep up), if you had a quarter of a brain you'd be begging them all to sit down and have a beer with you.

Figure out who your real enemies are, fucking right now, and make it the fucking priority to remove them, or continue down the malevolent spiral of misery that you've allowed to rape you, and fuck your future generations even more.

FOCUS or perpetually lose, you pillocks.

Then you can start fighting over who eats the red smarties last, K?


Thu, 02/17/2011 - 18:19 | 971970 EventHorizon
EventHorizon's picture

well said

Thu, 02/17/2011 - 18:24 | 971984 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Amen brother!  ++++++

Fri, 02/18/2011 - 05:09 | 973431 bluemaster
bluemaster's picture

I agree with you GoinFawr and I am sorry to see Americans so desperate and so much hurt  ...


Thu, 02/17/2011 - 17:26 | 971741 Lord Koos
Lord Koos's picture

Are you?

Thu, 02/17/2011 - 15:53 | 971252 I think I need ...
I think I need to buy a gun's picture

13000 people..yeah that should be on the news....but what i got last night was higer prices due to the weather both on local and national. The floods in Australia are going to send our prices thru the roof.

Thu, 02/17/2011 - 16:27 | 971398 Cognitive Dissonance
Cognitive Dissonance's picture

Yup, the MSM will blame it on the floods in Aussie land, cold weather in southern US and northern Mexico, whatever.

Blame it on anything but the Fed.

Thu, 02/17/2011 - 21:37 | 972708 Milestones
Milestones's picture

I believe the figure used was 11% of all the U.S ag. is used to feed the U.S. population. Appx. 40% is used to make ethenol and another 40% is for anamial feed.

You are correct, the all the rest is happy horse----.     Milestones

Thu, 02/17/2011 - 15:02 | 971046 MarketTruth
MarketTruth's picture

Regulation is worthless if no is will to file CRIMINAL charges.

Thu, 02/17/2011 - 15:18 | 971120 Mr. Poon
Mr. Poon's picture

To play the Devil's Advocate for just a moment ( he does need representation, after all), what exactly would be the crime here?  Taking money from hapless trading counterparties because they weren't as good at executing a trading strategy as the accused were?  Forgive me, but . . . isn't that what literally every active trader is trying to do?

Thu, 02/17/2011 - 17:57 | 971882 pbnyc
pbnyc's picture

Agreed. And how does it matter whether you hold on to the stock for seconds or days? This game of "hot potato" he describes makes for fun reading but does not explain the flash crash. For every seller, there is a buyer. 

This person isn't even real. A google search for the name "R T Leuchtkafer" exclusively returns letters he has written railing against high frequency trading. 

Thu, 02/17/2011 - 15:04 | 971049 gordengeko
gordengeko's picture

It's disheartening to say the least when 90+% of the people in the country you/we live in have no idea about how this matrix works or even that there is a matrix of deception to begin with.  Godspeed to zerohedge on keeping the light shining.  They may be able to fool most of the people most of the time but there are some that see this slow, soul-draining train wreck coming!

Thu, 02/17/2011 - 15:46 | 971228 newworldorder
newworldorder's picture

Has anyone tried to explain this to Congress and our President?

Thu, 02/17/2011 - 16:20 | 971360 Uncle Remus
Uncle Remus's picture

And that would accomplish what; blinks, blank stares and a boilerplate thank you letter?

Thu, 02/17/2011 - 15:03 | 971053 oklaboy
oklaboy's picture

maybe a job opeing in WI?

Thu, 02/17/2011 - 15:58 | 971275 serotonindumptruck
serotonindumptruck's picture

As a member of the Wisconsin National Guard?


Thu, 02/17/2011 - 15:08 | 971069 DavidC
DavidC's picture

"Institutional volume is fleeing, while retail volume is skimmed off and shrinks."

Says it all. And these idiots at the Fed do not have the with or wisdom to understand this.


Thu, 02/17/2011 - 15:15 | 971101 trendybull459
trendybull459's picture

So much stuff and so little reality,why not to say simply that and that and that,how much water,darling,poeple today reading articles as high frequency trading ,so,please,save our time exposing us to water melons!

Thu, 02/17/2011 - 15:14 | 971102 Fred Fernakie
Fred Fernakie's picture


the above report is only meaningful if you're trying to play their game, i.e, trading, which for most ppl is a losing strat. it has no effect on an investor, individual or otherwise. investors have a buy price independent of the market quote; it's based on value. actually, the malfeasance described in the article provides investors with an edge, sometimes substantial.  

Thu, 02/17/2011 - 15:41 | 971213 BearOfNH
BearOfNH's picture

In the long run, statistically all stocks go to zero. So an "investor" would see all stocks as overpriced.

Unless of course, you control an entire company, or several. Then you have a miniscule chance of becoming the next Bill or Larry or Warren.

Investing is really no more profitable than trading. Buy and hold died long ago. It's all one big fractal.

Thu, 02/17/2011 - 15:17 | 971118 Oh regional Indian
Oh regional Indian's picture

HFT is a logical conclusion of technology's impact on trading.

As inevitable and predictable as the full moon today.

systemic instability, unplanned, will ultimately come, but only suckers will get left holdiing the bag.

And the bag will be hypothecated from DTCC at that.

Bad times coming.


Thu, 02/17/2011 - 15:18 | 971121 buzzsaw99
buzzsaw99's picture

The fed & jpm can cover up any damage they do. Ever seen an alumni fix up a frat house after a twenty kegger? Same thing.

Thu, 02/17/2011 - 15:22 | 971145 johnQpublic
johnQpublic's picture

that is absolutely precious


like to see 'em fix it up after they burn it down which is a better comparison

Thu, 02/17/2011 - 15:33 | 971182 Temporalist
Temporalist's picture

Related to the JPM:

Bill Winters Gets Rothschild Funding for Renshaw Bay

"Bill Winters, the former co-chief executive officer of JPMorgan Chase & Co.’s investment bank, started an asset management and advisory firm with funding from Jacob Rothschild’s RIT Capital Partners Plc.

Winters, 49, will own 50 percent of the new company called Renshaw Bay, according to a statement. London-based investment trust RIT and Reinet Investments SCA, a Luxembourg-based investment company chaired by Johann Rupert, will own the rest."



Thu, 02/17/2011 - 15:18 | 971123 Bansters-in-my-...
Bansters-in-my- feces's picture

Regulation is for pee-ons and non inbred family trees,and mainly anyone whom is anti-Israel too.

Thu, 02/17/2011 - 15:21 | 971131 The Axe
The Axe's picture

FLASH CRASH    GMCR     crazy

Thu, 02/17/2011 - 15:22 | 971137 trendybull459
trendybull459's picture

ps resume:Hi Fereequency or HF trading is good,the Bears should expect that as soon as markets starts to collapse after Berdanke(kind of russian short cutted bazuka) will be stoped by riots on Wall Street,we invite all arabs to protest in front of NY stock exchange and White house,we will support you in our total human rights for stable currency in whoch we paid and stable future.In this time HF trading will really help or Bears may hope and so to keep positions while being hard srewed untill HF trading fall into their hands or make them happy,all other cases do not represent any kind of mindfull research other that bla bla bla-we want to see action and pain crash was not enough to feel it,why no one explained why after the pain crash markets slowly went into same numbers?Where is comission on this investigation???i was happy to use it as indicator

Thu, 02/17/2011 - 15:29 | 971167 michigan independant
michigan independant's picture

"No one planned it. It happened as an unanticipated consequence of well-meaning reforms to a flawed system."  It does not account for the Political Economy who does not wish to be seen feeding. Atypical for Revisionist.

Thu, 02/17/2011 - 15:46 | 971230 rosiescenario
rosiescenario's picture

....HFT = putting the herd on speed (or crack, to be more modern).

Thu, 02/17/2011 - 15:47 | 971233 Cdad
Cdad's picture

We have heard one apologist after another in the MSM telling us everything is fine, and HFTs did not cause the Flash Crash.  And the same folks wonder why no one is interested in stocks. 

Again, and in the event that anyone is paying any attention to anything out there, capital will not form under such corruption as has been established by our current banking regime, the criminal syndicate known as Wall Street.  All we are left with is Bernanke bucks...which will ultimately lead to the end of our economy.

Until something is done, there is no point in buying stocks.

Thu, 02/17/2011 - 17:28 | 971755 Bam_Man
Bam_Man's picture

 All we are left with is Bernanke bucks...which will ultimately lead to the end of our economy.


As the Bernanke Buck loses more and more of its "moneyness" every day. Judging by what Silver just did, it lost more than usual today...

Thu, 02/17/2011 - 15:49 | 971243 Buzz Fuzzel
Buzz Fuzzel's picture

Yes, more regulation that is the answer if you are looking to confuse things even further and provide more cover for people to game the system.

More rules do not translate to better behavior.  Enforcing rules does. 

Several thousand years ago a guy named Moses wrote down all the rules we will ever need, 10 of them.  If we could just enforce the last three 90% of our problems would be solved.  Do not steal.  Do not lie.  Do not covet.  It is that simple.

Thu, 02/17/2011 - 15:56 | 971266 Poofter Priest
Poofter Priest's picture

I'd distill it down even further to....'do unto others as you would want others to do unto you'.


Thu, 02/17/2011 - 19:54 | 972307 ViewfromUnderth...
ViewfromUndertheBridge's picture

for some time it has been..."do unto others before they do unto you"

Thu, 02/17/2011 - 16:04 | 971295 Cdad
Cdad's picture


So correct...well said.  If it wasn't clear, prosecutions is what I am talking about in terms of something being done.  The dog and pony show in DC with Dodd/Frank is useless.  DC does not have enough credibility left to restore confidence with more useless and unenforced laws.

Also, as was just mentioned on the Blow Horn [CNBC], the number of institutional market participants has soared...while investors are all but gone now.  Let the hedge fund wars commence.

But the market continues to pretend.  Whatever the price level today, pressure is building in Vix futures as we speak. 

Thu, 02/17/2011 - 20:27 | 972440 The Alarmist
The Alarmist's picture

Several thousand years ago a guy named Moses wrote down all the rules we will ever need, 10 of them.  If we could just enforce the last three 90% of our problems would be solved.  Do not steal.  Do not lie.  Do not covet.  It is that simple.

Actually there were more like 613 commandments. A lot of us seem to forget or ignore a number of them:

Not to steal money stealthily (take that, Bernankestein)

The court must implement punitive measures against the thief.

Not to rob openly.

Not to withhold wages or fail to repay a debt.

Not to covet and scheme to acquire another's property.


Thu, 02/17/2011 - 16:20 | 971359 Downtoolong
Downtoolong's picture

Great post. The most thorough and accurate I have seen yet on this subject of HFT and the sham of a market that it is produces. So far from fair and efficient it is almost laughable. I hope Chuck Schumer reads it. Maybe he will think twice about fighting so hard to keep the New York label on his favorite exchange in its current form.

My favorite phrase in the article, "volume is not liquidity." There is a huge difference in the trading protocol of a true market maker and a scalper.  



Liquidity for a chosen few.

Always there when you don't need it,

and never when you do.



Thu, 02/17/2011 - 16:22 | 971366 dearth vader
dearth vader's picture

To shed some light on the subject, this guy's name, Leuchtkafer, in English means "firefly".


Thu, 02/17/2011 - 17:54 | 971873 Bam_Man
Bam_Man's picture

He probably changed it back from "Firefly" to the German so as not to be confused with Groucho's character (Rufus T. Firefly). Stilll one of the funniest movies ever made.

Thu, 02/17/2011 - 16:27 | 971403 pbnyc
pbnyc's picture

Who is this guy? 

Thu, 02/17/2011 - 18:09 | 971931 lbrecken
lbrecken's picture

stop the gibberish and get to the point which is QE3 is it going to happen or not.  if it is then we have to put up with Tylers hypothesis for another 1 yr at least....

Fri, 02/18/2011 - 00:11 | 973077 StychoKiller
StychoKiller's picture

Huh?  Why, is no one willing to shake hands with the robots?  They only have a grip of 4000psi, don't you trust them?

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